(Bloomberg) -- Kenya will decide on the type of its next International Monetary Fund program upon the expiry of the current arrangement, according to the Treasury.
The East African nation has “not reached such a decision yet” and will make a pronouncement “on the nature of the next program with IMF after the end of the current program in April,” Treasury Principal Secretary Chris Kiptoo said Friday by phone.
It may choose to negotiate a fresh funded program to replace the ongoing $3.6 billion deal agreed in 2021. In the past, Kenya held a $1.5 billion stand-by credit facility, which it could access only in the event of certain economic shocks. It had not tapped that precautionary arrangement by expiry in 2018.
The IMF “remains an important development partner,” Kiptoo said. In July, he told lawmakers that authorities were in talks for a new program, without giving more details.
Kenya is in dire straits as it awaits a long-delayed $600 million IMF disbursement. Its income targets have also taken a hit after the Treasury had to forego $2.7 billion of planned taxes following deadly protests against new revenue-raising measures.
As part of reforms agreed under the program, President William Ruto’s government has sought to increase taxes, cut spending and sell some state-owned assets. But that IMF-backed economic orthodoxy backfired and elicited fierce backlash in June and July when at least 60 people were killed during street marches.
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As a result, Kenya’s budget-financing gap has widened and the Treasury plans to take on about $2.8 billion in foreign loans and borrow $3.2 billion locally to fill that hole, despite its debt being classified as at high risk of distress.
The nation is in talks for a $1.5 billion loan from Abu Dhabi to help bridge its budget-financing gap, according to people with knowledge of the plans.
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--With assistance from Kerim Karakaya.
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